Warning About Closing Out Lease Buyout

Finally got around to buying out the lease on my Stinger, after three lease payments.

The process took some time, with various hoops to jump through, and pitfalls to avoid. My total payoff amount included the unpaid balance on the lease, plus Washington State sales tax. That's standard practice in WA.

However, when I received the Bill of Sale from KIA Motor Finance (KMF), it showed the total payoff amount in the "Cash Sale Price", and the "Sales/Use Tax" amount was shown as zero.

Nice try, KMF.

I contacted the local vehicle licensing agent, who said that based on what's shown on the Bill of Sale, they would have to charge me sales tax to issue a new title. To avoid this, I would have to get KMF to send me a statement indicating that they have already paid the sales tax. So I called KMF and requested such a statement. The rep I spoke with at KMF said they would issue the statement and send it within 7 to 10 business days.

Based on this experience, I recommend that others who plan to buy out their lease include an explicit request for KMF to either 1) properly show the amount of sales tax paid in the "Sales/Use Tax" box on the Bill of Sale, or 2) include a statement verifying that you have paid the sales tax to KMF.

Finally got around to buying out the lease on my Stinger, after three lease payments.

The process took some time, with various hoops to jump through, and pitfalls to avoid. My total payoff amount included the unpaid balance on the lease, plus Washington State sales tax. That's standard practice in WA.

However, when I received the Bill of Sale from KIA Motor Finance (KMF), it showed the total payout amount in the "Cash Sale Price", and the "Sales/Use Tax" amount was shown as zero.

Nice try, KMF.

I contacted the local vehicle licensing agent, who said that based on what's shown on the Bill of Sale, they would have to charge me sales tax to issue a new title. To avoid this, I would have to get KMF to send me a statement indicating that they have already paid the sales tax. So I called KMF and requested such a statement. The rep I spoke with at KMF said they would issue the statement and send it within 7 to 10 business days.

Based on this experience, I recommend that others who plan to buy out their lease include an explicit request for KMF to either 1) properly show the amount of sales tax paid in the "Sales/Use Tax" box on the Bill of Sale, or 2) include a statement verifying that you have paid the sales tax to KMF.

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I ran into the same issue! I live in MN-and when I called Kia, they said that there was nothing they could do. They said the initial taxes that were charged up front were paid directly to the state from the dealership, and that the sale price did not include any tax. The MN DMV would not budge, or give me credit for initial tax paid, so I was stuck with the full tax bill in order to register the car in my name.

Did you get the revised form from them? I am curious to see how this goes for you.

Would the tax that you initially paid only be on the initial 'lease' amount? You would still owe taxes on the residual amount, right?

Finally got around to buying out the lease on my Stinger, after three lease payments.

The process took some time, with various hoops to jump through, and pitfalls to avoid. My total payoff amount included the unpaid balance on the lease, plus Washington State sales tax. That's standard practice in WA.

However, when I received the Bill of Sale from KIA Motor Finance (KMF), it showed the total payout amount in the "Cash Sale Price", and the "Sales/Use Tax" amount was shown as zero.

Nice try, KMF.

I contacted the local vehicle licensing agent, who said that based on what's shown on the Bill of Sale, they would have to charge me sales tax to issue a new title. To avoid this, I would have to get KMF to send me a statement indicating that they have already paid the sales tax. So I called KMF and requested such a statement. The rep I spoke with at KMF said they would issue the statement and send it within 7 to 10 business days.

Based on this experience, I recommend that others who plan to buy out their lease include an explicit request for KMF to either 1) properly show the amount of sales tax paid in the "Sales/Use Tax" box on the Bill of Sale, or 2) include a statement verifying that you have paid the sales tax to KMF.

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I just recently bought out my lease as well. I live in WA too. I'll have to call KMF on Monday to get the same documentation. Thanks for the heads up.

@KiaWill, sales tax liabilities and collection practices vary from state to state. So there's no standard process that applies universally.

In WA, sales taxes for a lease are collected as a percentage of the up-front capital cost reduction, and then as a percentage of each monthly lease payment. (One bogus aspect of this is that the sales tax is applied to the total lease payment, including the principal AND interest components!!!) Then, if the lessee purchases the vehicle either during or at the end of the lease period, sales taxes are charged as a percentage of the remaining unpaid capital balance.

In other words, in WA, the lessee has to pay sales taxes at the start of the lease, during the lease and when they purchase the vehicle. When all is said and done, the total sales tax liability is the sales tax rate (10.1%) multiplied by the purchase price of the vehicle plus interest charges on the lease payments. (Are we having fun yet?) ​

@Atheleus, I contacted KMF couple of days ago to request they send me the statement that they have forwarded my sales tax payment to the WA department of licensing. I should get that in the mail next week.

Fortunately, the KMF rep I spoke with on the phone didn't dispute that my buyout payment included sales taxes. I also kept a photocopy of the lease buyout package that KMF sent me at the start of the process. One of the documents in that package firmly states that KIA was required to collect the sales tax from me. The document also shows an itemization of my buyout amount, including the sales tax amount.

"Funny" that KMF later forgot to show on the Bill of Sale that I had paid the sales tax. Either they made a "mistake" by not showing it, or they just hope that some of their customers aren't knowledgeable or pay close enough attention. But in my case, there's no way that KMF is going to be able to dodge this.​

@iclicku, did you already obtain a new title for your Stinger? If you obtained a new title, did the WA Dept. of Licensing require you to pay them sales tax on the buyout amount of your lease? If so, you may have been stiffed by KMF.

I would definitely check your buyout paperwork to see if they collected sales tax as part of the buyout amount. One way to confirm this would be if the buyout amount was about 10 percent more than the remaining balance on the lease was after your final monthly lease payment.

@KiaWill, sales tax liabilities and collection practices vary from state to state. So there's no standard process that applies universally.

In WA, sales taxes for a lease are collected as a percentage of the up-front capital cost reduction, and then as a percentage of each monthly lease payment. (One bogus aspect of this is that the sales tax is applied to the total lease payment, including the principal AND interest components!!!) Then, if the lessee purchases the vehicle either during or at the end of the lease period, sales taxes are charged as a percentage of the remaining unpaid capital balance.

In other words, in WA, the lessee has to pay sales taxes at the start of the lease, during the lease and when they purchase the vehicle. When all is said and done, the total sales tax liability is the sales tax rate (10.1%) multiplied by the purchase price of the vehicle plus interest charges on the lease payments. (Are we having fun yet?) ​

@Atheleus, I contacted KMF couple of days ago to request they send me the statement that they have forwarded my sales tax payment to the WA department of licensing. I should get that in the mail next week.

Fortunately, the KMF rep I spoke with on the phone didn't dispute that my buyout payment included sales taxes. I also kept a photocopy of the lease buyout package that KMF sent me at the start of the process. One of the documents in that package firmly states that KIA was required to collect the sales tax from me. The document also shows an itemization of my buyout amount, including the sales tax amount.

"Funny" that KMF later forgot to show on the Bill of Sale that I had paid the sales tax. Either they made a "mistake" by not showing it, or they just hope that some of their customers aren't knowledgeable or pay close enough attention. But in my case, there's no way that KMF is going to be able to dodge this.​

@iclicku, did you already obtain a new title for your Stinger? If you obtained a new title, did the WA Dept. of Licensing require you to pay them sales tax on the buyout amount of your lease? If so, you may have been stiffed by KMF.

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I have not received my title nor have I gone to the dept of licensing yet. I will be checking to see everything is in order before doing so. I appreciate your insight on this. I will update as I complete the process.

@KiaWill, sales tax liabilities and collection practices vary from state to state. So there's no standard process that applies universally.

In WA, sales taxes for a lease are collected as a percentage of the up-front capital cost reduction, and then as a percentage of each monthly lease payment. (One bogus aspect of this is that the sales tax is applied to the total lease payment, including the principal AND interest components!!!) Then, if the lessee purchases the vehicle either during or at the end of the lease period, sales taxes are charged as a percentage of the remaining unpaid capital balance.

In other words, in WA, the lessee has to pay sales taxes at the start of the lease, during the lease and when they purchase the vehicle. When all is said and done, the total sales tax liability is the sales tax rate (10.1%) multiplied by the purchase price of the vehicle plus interest charges on the lease payments. (Are we having fun yet?) ​

@Atheleus, I contacted KMF couple of days ago to request they send me the statement that they have forwarded my sales tax payment to the WA department of licensing. I should get that in the mail next week.

Fortunately, the KMF rep I spoke with on the phone didn't dispute that my buyout payment included sales taxes. I also kept a photocopy of the lease buyout package that KMF sent me at the start of the process. One of the documents in that package firmly states that KIA was required to collect the sales tax from me. The document also shows an itemization of my buyout amount, including the sales tax amount.

"Funny" that KMF later forgot to show on the Bill of Sale that I had paid the sales tax. Either they made a "mistake" by not showing it, or they just hope that some of their customers aren't knowledgeable or pay close enough attention. But in my case, there's no way that KMF is going to be able to dodge this.​

@iclicku, did you already obtain a new title for your Stinger? If you obtained a new title, did the WA Dept. of Licensing require you to pay them sales tax on the buyout amount of your lease? If so, you may have been stiffed by KMF.

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Thank you for the reply. Please keep this post updated on what ends up happening. Like I said, I had to pay the tax in order to transfer the title, but I called Kia Motor Finance tonight and asked them to send me a document on the original amount of tax paid so that I can try to get some sort of refund from the State (I am not holding my breath).

I will be very curious to hear what the end result ends up being for you. The 20+ calls I have had with KMF have been soul crushing.

Thank you for the reply. Please keep this post updated on what ends up happening. Like I said, I had to pay the tax in order to transfer the title, but I called Kia Motor Finance tonight and asked them to send me a document on the original amount of tax paid so that I can try to get some sort of refund from the State (I am not holding my breath).

I will be very curious to hear what the end result ends up being for you. The 20+ calls I have had with KMF have been soul crushing.

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Agree with you about how annoying all of this is.

It does not help KIA build the kind of quality brand stature it is seeking to establish with the Stinger.

KIA, ARE YOU READING THIS???

Based on your description of your situation, seems like there could be three potential scenarios:

Scenario 1. The lease buyout amount you paid to KMF did not include the sales tax. In this scenario, it would make sense that you'd have to pay the sales tax to the state yourself. However, I doubt that KMF would have neglected to charge you the sales tax. If your buyout amount was within a few hundred dollars of what the remaining balance was on your lease after your final monthly lease payment, then KMF didn't collect sales tax. Again, this scenario seems relatively unlikely.

Scenario 2. The lease buyout amount you paid to KMF did include the sales tax AND KMF did forward the sales tax payment to the state. In this scenario, the state was paid twice for the sales tax, and you are due a refund of the duplicate payment, either from the state (more likely) or KMF (less likely). In order to get a refund from the state, you'll probably have to get a statement from KMF that you actually paid the sales tax amount to KMF as part of your buyout, or provide other valid proof to the state that you paid the sales tax to KMF as part of your buyout.

Scenario 3. The lease buyout amount you paid to KMF did include the sales tax AND KMF did not forward the sales payment to the state. If KMF collected the sales tax from you and deliberately chose not to forward it to the state with the expectation that you'd pay it again to the state, then you may have grounds to charge KMF for fraud. This scenario also seems relatively unlikely, and even if it did occur, it could be tough to actually prove fraud.

Hope you can get this resolved to your satisfaction. Let us all know how it turns out.

Ill add to the list...be sure to send the Odometer disclosure with the lease buyout payment. i was told to fax it separately and NOT to include it. I have now faxed it 3 times to no avail. Oh, and the dont/wont accept a scanned email so fax or hardcopy mail are the only options.

Still wont release the title until they process this and each time they give me another 7-10 day window.